#84. AUrate is creating a new gold standard for accessible and direct-to-consumer fine jewelry. We talk with co-founder Bouchra Ezzahraoui about building an international supply chain that aims to change the way and frequency that women buy accessories. The Loose Threads Podcast features in-depth discussions with leaders across the rapidly changing consumer economy.

Check out the full transcript below.

Richie: [00:00:07] Welcome to the 84th episode of the Loose Threads Podcast, a show about the rapidly changing consumer economy. This episode is brought to you by Loose Threads Membership, which gives you actionable analysis and insights that drive growth, and Loose Threads Espresso, your energizing and high-pressure filter for consumer news—in context. We also have a newsletter that features the latest open letters to CEOs, podcasts with industry leaders and news from Loose Threads. Check it all out at LooseThreads.com.

Richie: [00:00:35] Joining me today Bouchra Ezzahraoui, a co-founder of AUrate, a direct-to-consumer fine jewelry company that is bringing the jewelry world into modern times.

Bouchra: [00:00:45] Our woman returns much more often. They don’t come just for Christmas holidays and Valentine’s Day and Mother’s Day. They want newness every month.

Richie: [00:00:57] Bouchra and our co-founder, Sophie Kahn set out to break down the barriers surrounding fine jewelry, from the high prices to the low frequency of purchase, as well as the complex international supply chains it takes to make a piece what it is. Instead AUrate has built a business, both online and offline, that aims to change the way and frequency that women buy small accessories. Here’s my talk with Bouchra Ezzahraoui.

Richie: [00:01:24] So why don’t we just talk a bit about your background before you started the company, what you were working on—and then we’ll talk about the beginning.

Bouchra: [00:01:30] I am Moroccan-born. I lived in Morocco for the first 12 years of my life. I moved to Paris when I was 12 for school. I spent almost ten years there and I came to Princeton for school. So my whole life I was moving with school in a way. I studied math, finance after in a grad program and started in a corporate job. I traded interest rate derivatives at Goldman Sachs for almost seven years. Great learning experience.

Richie: [00:02:00] About what? Why?

Bouchra: [00:02:02] You know how when you start working at 21, 22 and you think you know things or you imagine your world in one way and it becomes something else. I think, for me, it taught me how to actually interact with people. I got promoted very quickly. I was actually the youngest promote of my class in America. And it taught me about meritocracy. So it was kind of a hardcore experience. I went for a trading so that’s a little bit stressful, but it taught me how to deal with stress, how to take risk. Who you are as a woman or not, of color, whatsoever, it doesn’t matter. It’s all about what you bring to the table. I think that, for me, was an amazing experience and I was very much compensated for it in a very [meritocratic] framework.

Bouchra: [00:02:46] That’s something that I really believe in and I try to institute in my own company right now. So there are a lot of people [who] come in and they think, potentially, “This is my fixed salary,” for instance. And you’re like, “No, I think you should believe in your fixed salary and believe in the upside of this, a startup, is it function’s a quarter at a time and chances of a startup dying are super, super high and you should have that hunger and hustle.” I think I learnt a lot from it from my past experience.

Richie: [00:03:16] What was the first inkling of the idea of the company?

Bouchra: [00:03:19] So it comes from a very personal experience. Sophie and I met at grad school—ten years ago at Princeton—and we became lifelong friends since. Actually, our program was a bunch of boys and a few women as in you can count them less than on your one hand. She didn’t like the finance route so she started in consulting. I was in finance and she switched very quickly to fashion. So she started working at Marc Jacobs and we always had those brunch meetings. We’re sitting at breakfast and she was wearing this ring that turned her finger green. She went to wash her hands and her finger turned green. For me, gold is not a luxury. Gold is actually part of who you are, especially in Morocco. You inherit that from your grandmother and your mother. I think my ears were pierced when I was a month old. I don’t think I had the choice. But we know the value of gold and fine jewelry and I am allergic to begin with. So I was seeing that and I’m like, “How much did you pay for this?” And it was $2,000 retail value. I’m like, “How can you pay $2,000 retail value for something that’s brass, turning your finger green, but it looks gold and you think it’s gold?”

Bouchra: [00:04:27] And we were discussing it. The market offered two options. It was either very high and brands that are very highly priced or very cheap costume jewelry. There was a huge void in that middle market type, both price and in quality, where you couldn’t find jewelry that was contemporary fashionable, but that was also well priced and that you could afford as a woman. And then you took a step back and I’m like, “Okay, so the very highly priced brands target men. They market to men.” And no one was going after the women and women, now, are self-purchasers. We were two working women in our 20s and we could afford, of course, the very highly priced thing or ask to be gifted for some special occasion. But we just wanted to buy an initial necklace and potentially a little bar earring that I want to wear everyday. So we didn’t have that. So we started from the personal experience.

Bouchra: [00:05:24] We did a lot of research around that and we just couldn’t find [anything]. The market wasn’t offering that. So there was a clear void. We started working on this on the side as a friends’ project. We took six months of classes at Parsons to know exactly what we were talking about. It was all about jewelry design and I believe that I always like being, almost, the dumbest person in the room. I listen more than what I say because that’s I think how you should operate in a business. We took those classes, but then we started dealing with the manufacturers, hiring people like the technical designer at the time. We knew exactly what we wanted in terms of look and feel but we couldn’t, obviously, do the technical quality of this. It was impossible to find a manufacturer who would work with us. Imagine minimum quantities and they were like, “Who are you?” It’s a very male-dominated environment as well. Extremely traditional, very capital intensive because, at the end of the day, your stock, your inventory isn’t gold so that’s actual cash.

Bouchra: [00:06:20] So I guess our full-time jobs were paying for this. So, 2015, we incorporated the company, we finished those classes at Parsons and we hired two people to start working with. It was like, “Okay, let’s do this.” Then we realize we don’t have any external funding. It was our savings and some working capital that we borrowed from family and friends. How are we going to get our name out there? No one knew what AUrate is. To give you an idea, AUrate—”AU” is actually gold in the periodic table, rate is rate of return on your purchase. But “AUrate” also tells a story.

Bouchra: [00:06:52] Our target was women like us who just were looking for high-end, quality, fine jewelry at an accessible experience. I emphasize accessible experience, for me, because it’s not only about price. It’s—when you go to a store for instance, you’re not intimidated by someone opening a glass box that’s higher than you a little bit and he’s wearing a glove and you’re scared of asking for the price. It came from our frustration that we wanted to solve into the market.

Bouchra: [00:07:22] In the beginning, as I was mentioning, we didn’t have any dollars to spend on digital marketing. So our only way for us to get the name out there was opening pop-up shops. And I remember our first pop-up was right across the street from my old apartment. I had roommates at the time. Next to our room—that was used for an AUrate office. And the pop-up was ten days. We went to the owners like, “Hey, how much would you charge on this?” and he gave a price and it was like, “Okay, we can only afford ten days.” We sold out. I think at the time we had 40, 50 SKUs. We sold out of them. But, for us, what was more important—it wasn’t necessarily the revenue first. It was super profitable. People were actually giving us feedback on the collection itself. “This diamond is too big or too small. This chain is too thick. We like smaller pieces. Add more colors into your gold collection.” 2016 was fully product-market fit. Exactly establish what are people looking for and how can we make this whole experience better.

Richie: [00:08:21] And so you launched this in stores not online.

Bouchra: [00:08:24] We had an ecommerce platform but we had no additional marketing spend.

Richie: [00:08:29] Right.

Bouchra: [00:08:29] So it was launched online. There was a website that was made. But we didn’t have proper traffic online because we just didn’t have the dollars to spend. But there is something very interesting. We actually had a lot of discussions with a few friends who already had successful direct-to-consumer companies. We were very aware of the market and dollar efficiency and how your CAC goes ballistic in the beginning and then how you can drop it. We were very well-versed in that. The cheapest option for us was go offline first and offline was driving online. So that first year of complete beta, just super scrappy work of a million pop-ups that we did everywhere—Soho, Upper East and Williamsburg—at the time. We still had 25% of sales that went online because those storefronts were almost those billboards that you have in the subway or also the same Facebook ads that people see online, but they just come back to you. They don’t necessarily buy at the store but they just come back and buy online because now you’re a legitimate brand.

Richie: [00:09:32] Do you remember how many you did in 2016?

Bouchra: [00:09:34] I think we did around four.

Richie: [00:09:36] Were there points in that first year, as you were doing the pop-up and so forth, when you ever were like, “We just shouldn’t do this?”

Bouchra: [00:09:41] We were super scared when we went for the longer-term pop-up for three months where rent was insane. Also the jewelry business is cyclical. A lot of businesses have their cycles. Swimwear, for instance. Q1 pop-ups were, relatively speaking, super awful compared to the December, November pop-ups. But, at the end of the day, you can’t not take the risk because, at that stage of the business, you have no idea. But, basically, maybe for two weeks you’re losing a lot of money and the last two weeks just make it up.

Bouchra: [00:10:13] I think, as an entrepreneur, you really see the highs of the highs and the lows of the lows. The lows are really difficult, but what I learned—and, again, we’re talking about my other corporate job—what shaped me a lot is I was comfortable losing money and that’s something that you have to learn on the field and I enjoy that. I know that, for me, I just want to know if I’m losing money or, if I’m wrong, why I’m wrong and how I can address it. You’re running your business with the non-ego policy. You don’t know what you don’t know. You always want to be the dumbest person in the room and just listen. Again, it’s okay to fail as long as you have a plan. And, for me, that’s been the learning experience from anything I’ve done, quite frankly, in my professional career.

Richie: [00:10:56] And so at what point did you leave your job?

Bouchra: [00:10:58] February 2017.

Richie: [00:10:59] All through 2016 you’re still—

Bouchra: [00:11:01] Yeah, and I was a salesperson during the weekends and taking shifts after hours. When I left Goldman, I was taking shifts as a salesperson.

Richie: [00:11:08] What were some of the more interesting anecdotes that you would hear? You talked a little bit before about [getting] the feedback and so forth, but what were some of those most important or interesting or unexpected learnings that you were getting from just talking to people not sitting behind your computer and hoping that they would show up?

Bouchra: [00:11:24] I think I’m pretty good at being a salesperson because I would, again, listen more and ask more questions to our customers and that helped us so much. You have no idea the wealth of information that you get just being there. I actually still do this. I go and Sophie does that as well. We go sit at a store on our laptops and just hear. So the anecdotes were, number one, when someone is seeing jewelry sitting on a tray and it’s actual gold and actual diamonds and they ask the question, “So how is this so cheap? Is this real? What does that mean?” So we had, again, authenticity certificates. Our jewelry is ethically sourced. How can I relate that to a customer on the spot when they’re there? The diamonds are from XYZ. It’s not blood diamonds, above ground. The whole supply chain is in New York and we have certificates for anything. All of these anecdotes where—it’s actually interesting. So you sit there like, “No, my product is good.” And someone else is telling you, “Well, you’re telling me you’re ethical. But how is that? You’re telling me you’re cheaper than others. How can you make it cheaper?” Because it’s made here, but also because you were conditioned, as a customer, to think that this should cost 10X or 20X not 2 or 3X. That’s basically it.

Bouchra: [00:12:37] So the funny anecdotes, also. I think something that I want to mention: our jewelry is laying in open containers. So anyone can come in. A lot of people are like, “You guys are crazy. Jewelry is sitting there. Anyone can come into the store, take a piece and leave.” Since we started with all those offline locations—we currently have four stores. We’re opening two more by year end—we had two thefts. You would be shocked about the goodness of people. Not everyone is a thief. It’s not because you have jewelry sitting there that people are going to be tempted to steal.

Richie: [00:13:09] So you mentioned before the vertical integration. You’ve said before about having the supply chain in New York. Talk about, traditionally, what these supply chains look like and then talk about how you wanted to build yours and what that has done for you.

Bouchra: [00:13:19] So, traditionally, a lot of those come out of Asia, some were in southern Europe as well. So what happens is a lot of brands, they have longer supply chain timelines. You have a lot of people who take parts from, let’s say, Southeast Asia. It’s assembled somewhere on the other side of Asia and then you can put a stamp on it—”Designed in the U.S.”—and we’re very familiar with that process. And it’s something, in the beginning, we were considering. We want to be affordable so for us to, obviously, slash costs, let’s look at other alternatives. But our pieces demand such little labor. It’s not—they’re intricate, but we are about “less is more” and we don’t like the phony-type designs. We’re actually clean and minimal.

Bouchra: [00:14:08] When we did comparison—I’m Moroccan, and I remember our first trip [when] I took Sophie to Morocco with me, we were sitting with the manufacturer, but it was only 15% cheaper than what we would make it here because gold is a commodity. It’s the same price anywhere else. It’s publicly traded and everyone knows where gold is traded and when you make a piece out of your caster, it’s stamped at that rate of gold. So you can’t save much on that first step of manufacturing. Where you can save is on the labor after it. So when a piece comes out of the casting, it has to be polished, but those polishing or assembling the diamond steps were not that much cheaper overseas. So, for us, I want to make sure, when I tell someone, “This is ethically sourced and I know where it is from” to have those verifications every step of the way and it’s so much easier here.

Bouchra: [00:14:54] And, something else that helps us a lot—I know our business is very cyclical, but our women return much more often. They don’t come just for Christmas holidays and Valentine’s Day and Mother’s Day. They want newness every month. So we come up with products every month. And the only way I can sustain this business model is to be vertically integrated and be in New York or at least in the U.S. and that’s been working great. The collection gets judged very often and the worst performers don’t remain in the collection, but it leaves a lot of room for the newness that actually keeps our customer returning. That drop type model has proved itself to be much more successful for us than just have every collection, there is one ring for the holidays. We’re not that. Our woman wants to layer and she buys for herself and she comes back for newness and different stories. Jewelry is much more personal and personable as well.

Richie: [00:15:50] When you started, did you think you could do this all in New York? Because people who live here know there is the diamond jewelry district and then people in the industry generally know you just don’t make stuff locally because you’re going to overpay for it and so forth. So how did that all merge in your head and then what was that experience of realizing, “Oh, actually we could get everything we want here?”

Bouchra: [00:16:10] No, I’ll give you numbers. You’re overpaying—potentially 10% or 15% [is] eating out of your margin, but I’m actually gaining much more customers coming back and being happy. When I show you a two-week timeline, you’re much happier than [if] someone showed you a three-month timeline. So I actually make much more in volume so it doesn’t matter. For me, actually, the value proposition of being vertically integrated or at least being made in the U.S. is much more superior than saying, “I’m going to make stuff in Southeast Asia and make people wait.” This, again, comes back to a lot of people [who] think [that the] customer remains the taste taker the price taker. No. Our customers actually have much more power and I see that through the customer journey when they go through the website and they go click on a piece. When it says “four-week timeline,” well, chances are they will likely drop off very quickly and not check out. But when they see it’s available, it’s all in data. A lot of people haven’t adapted to that yet. We’re super nerds in my team and we just have this wealth of data that, yes, it shows in your marketing something looks pretty but that pretty thing that looks in marketing has been the result of all those channels and data analytics that we’ve put together. This is our customer. This is what our customer wants and this is what they want to see. I don’t dictate that. My customer does.

Richie: [00:17:35] So, at the end of 2016, was the business where you wanted it to be or were there things that you wish had happened that were like, “Okay, that has to be the priority next year?” How did you feel the end of that year?

Bouchra: [00:17:45] So our focus when we were doing this on the side was, number one, product market fit. We didn’t do marketing and we didn’t have the dollars for it. So we just had the few dollars to assign and allocate and that was for product. So I think what was frustrating for us by then is we had a significant amount of sales just being super scrappy. We got to a point where we had clients ordering from Dallas or California [whom] we couldn’t reach out to. You know how you build an audience and then you go for the look-a-likes of those people? We just couldn’t reach them because we didn’t have the dollars for that. I was waiting for my Visa. That’s why I waited for so long—my green card. So when I got it, I left right away. We were interviewing—

Bouchra: [00:18:29] You left your job you mean?

Bouchra: [00:18:29] I left my job.

Richie: [00:18:30] How did that conversation go with your boss?

Bouchra: [00:18:32] It was actually interesting. Something that we manage to do very well, Sophie and I, is we were always super transparent with our managers and they were very thankful with that. As long as I did my job perfectly during the day, I can do whatever I wanted. It had to go through compliance and approval. Goldman is not an easy organization to deal with, but I think they were proud. First, I was one of the few women on the trading floor to begin with, especially in a trading seat, and they were actually proud if anything. It was like, “Look, she’s doing her own thing.” They found it, not amusing, but it was almost fascinating to them.

Richie: [00:19:07] Yeah. “Someone’s leaving this place!”

Bouchra: [00:19:09] Its like “gold, golden, Goldman.” All these words. It was actually pretty funny. But my boss was super proud. At the end, I think it was interesting. I was telling him, “I think we’re getting to a point, this is something.” And he was like, “Are you sure? You’re leaving a very coveted seat.” My seat was a very good seat. A lot of people would want that. I’m like, “Yeah, I think I’m ready.” And he respected that. He remembers, actually, my first interview before I got in, they were like, “Why do you want to do trading?” I was like, “Because, first, I want to run my own desk and have more skin in the game.”

Richie: [00:19:42] “Have your job.”

Bouchra: [00:19:42] Yeah. “I want to be you. But, actually, I just want to—it sounds bad—but I just want to make money very quickly and do my own thing.” It was open cards since day one and my boss, actually, was very proud of that and he loved it. It got to a point where I’m like, “I’m going to do my own thing.” And he’s like, “Are you sure?” And then some people were just confused. “So she’s leaving this trading seat to sell jewelry?” I’m like, “Yes.” It was a funny conversation but when I left, actually, a lot of people [whom] I dealt with in the market were reaching out to become investors. So it helped a lot. I was telling someone earlier I have nothing but good things to say about my old experience. Of course, it was very stressful. Of course. But you just thicken your skin and you move on. Fine jewelry is a very male-dominated business too. I’m also one of ten kids so I’m used to being in there and having to fight and hustle my way. But it’s okay.

Bouchra: [00:20:37] As long as—those manufacturers didn’t want to work with us in the beginning and we’ve managed to get one who found our project amusing and interesting. He saw, “Oh, these people are crazy, but yeah. I’ll take a shot at them and see.” And now they invested. That’s why I say I’m vertically integrated. They’re investors and they made the right choice and good for them.

Richie: [00:20:59] What did they think of your pricing when you told them what you wanted to do?

Bouchra: [00:21:02] The manufacturers?

Richie: [00:21:04] Yeah.

Bouchra: [00:21:04] They thought we were crazy. They thought, “How can you make markups on that?” But they’re used to wholesalers as well. They’re used to people who sell through wholesale and, obviously, you have to mark up your prices at least, I don’t know four- or five-times to break even. We did not. The value proposition of us doing this is we’re direct-to-consumer. So I manage my market and I control my customer experience and I pay for my stores and no one can dictate to me how much markup I can add.

Richie: [00:21:32] This is more of a broader question, but a lot of these direct-to-consumer companies believe that they could sell at a fraction of the price that they normally would through wholesale because they don’t need the margin: One, it’s getting marked up by an additional party in that chain. But also that, because they control all the things that they do, it’s actually cheaper to run. And I think some of these companies are starting to figure out it actually is the same or more expensive to actually run a direct business than it would to be a wholesale business. Did you find that you’ve left yourself enough room to run the business and explore the channels you want to? Or was some of that prediction [of] “Oh, actually we do need a little more margin than we expected because our marketing, our retail, etc., etc., is becoming more expensive than we anticipated?”

Bouchra: [00:22:13] I think, really, since we started, because—again, we didn’t have external funding—we were super ROI-focused. So the pricing dictated itself since day one to be comfortable for the company to run some risk. So we have, obviously, pieces that have super, super thin margins but it’s extremely calculated to acquire very early customers that we know will come back. It’s funny. When you say that retail is dying or not dying—I think commercial real estate is reshaping itself as well with respect to that and a lot of those places [that] used to cost—I won’t say numbers—but now they’re actually a third of the price that used to be paid maybe a year ago. So there’s a whole reshuffle in commercial real estate where you can actually really get very good deals and keep very slim margins and do very well. If I go crazy on my margins I’m not staying true to my value proposition either.

Bouchra: [00:23:10] So my most viable customer is my returning customer, obviously. I don’t spend too much to acquire them and they just keep coming back. Even my more lucrative customer is my omnichannel customer. They see me in store and they might not buy in store but they buy online. They come back to the store. So I’ve been struggling with that. Obviously, I’m a crazy numbers person, but I’m trying to strip out this causation-correlation between—a lot of people say omnichannel is great, but I have a hard time, when I look at my customer population, trying to distinguish: Is it that online drove my offline or offline drove my online? It’s hard. I know it works and I don’t think anyone has the secret sauce to say a very confident statement and say, “My online drove my offline.” Maybe the first movers. Warby, obviously. But Warby had the showroom. I bought glasses from them 2010 in the showroom. There is something to be said about that physical presence, especially for higher price point items. It’s not a razor that costs ten dollars. Those are higher price points and this omnichannel offline relationship, I just can’t, at least for the data that I have—I only started spending in digital since June last year. So it’s been close to 12 months of data and I still cannot answer that question.

Richie: [00:24:28] Alright, so we’re in 2017. You leave your job in February.

Bouchra: [00:24:30] Yeah.

Richie: [00:24:31] Sophie is still—she left or she’s still at her job?

Bouchra: [00:24:33] No, she left 2016.

Richie: [00:24:35] So she left first?

Bouchra: [00:24:35] Yeah.

Richie: [00:24:36] And then, as you enter 2017, where are you focusing? What were the priorities?

Bouchra: [00:24:43] Fundraising. Fundraising and hiring. We needed a digital marketer who [could] run with this, but we also wanted a strong ops person because our volumes were growing. Everything was happening at the same time. While we’re hiring and setting up the structures, and [hiring] a potential agency, PR, all these things—while you’re doing all of that you have to fundraise too. It’s my least favorite part of the job.

Richie: [00:25:04] And that was the first time you had done it?

Bouchra: [00:25:07] It was the first time we were fundraising except from family and friends.

Richie: [00:25:10] Which is a little easier of a process.

Bouchra: [00:25:11] Yeah. But what we found is it was super easy for us to fundraise. Number one, I had all these people reaching out to me. “What happened to you? You fell off the cliff. What are you doing?” So I was like, “Okay, this is what I’m doing,” and we got investors from that.

Richie: [00:25:29] As in older colleagues and so forth?

Bouchra: [00:25:30] And counterparts. Funny enough, if anything, we were oversubscribed. We wanted to raise two. In two months we were at 2.6. We were like, “We have to close this and move on.” We could have raised more, but we just didn’t want to go crazy with fundraising. So it was my least favorite part, but also my favorite part because I hear a lot of horror stories from other fellow startup founders [when] it’s a little bit difficult. But why it was my favorite part is because we were very surprised to the upside, by these people shocked [by what we] raised in a seed round. Usually, at this stage you have an idea. You haven’t executed on anything. Us, we had, not only, lined up stores, [but] we [also] had products, we had the actual design, we had sales. So people were like, “Okay.”

Richie: [00:26:15] There’s something to evaluate.

Bouchra: [00:26:16] There is. Yeah. There’s something. So we can have serious conversation with these guys. We’re not just talking fluff. It was literally numbers and some people were very—I’m not saying impressed, they were just shocked. You sit there and it was like, “Okay, this is where we are. This is the plan.”

Richie: [00:26:34] Objective data.

Bouchra: [00:26:34] Yeah. “This is where we’re going.” And they’re like, “Okay, you’re done.” Coming back to my old life. “You’re done. How much do you want?” Literally, some people were sizing us. “How much do you want?” That’s that. Hopefully that would be the experience on the Series A.

Richie: [00:26:47] Very nice. So when does that close?

Bouchra: [00:26:50] So start fundraising, working on the deck, everything: March 2017. We closed the round end of June 2017.

Richie: [00:26:58] Gotcha.

Bouchra: [00:26:58] And that closing, you know how it is. Go see the lawyer, everyone needs to sign, escrow account.

Richie: [00:27:03] Yeah, yeah.

Bouchra: [00:27:04] But we’re up and running.

Richie: [00:27:05] And then that’s when you started to spend on digital you said?

Bouchra: [00:27:07] Yeah.

Richie: [00:27:08] How did you approach that given you knew you couldn’t before but you also, again, it wasn’t like you had to start the car with digital too?

Bouchra: [00:27:15] For you to have statistically significant data, you have to spend on a lot of inefficient things and, again, you have to be comfortable with that. So, at the beginning, it was awful. Our CAC was insane but six months later we dropped it in half. We did a lot of funnel optimization. In the beginning, you want to go crazy. It was like, “I want to target as many people as I can.” I’m like, “Wait a second.” But what was easy for us, because of that offline data that we already had and lot of online sales—we made a quarter of the sales in 2016 online—we already had an idea of our customer base. So you can do a lot of segmentation. You can build a lot of lookalike audiences based off that so that was saving the day. We thought, for instance, that our customer was much, much younger, but actually our customer is not there. Kind of like what I try to call “the older millennial.” We capture a lot of younger population, but a lot of people who are a little bit older millennials.

Richie: [00:28:11] Yeah. I’ve talked to multiple people who have found that their customer is actually much older than they thought which is so interesting in the age of how to target young people, how to find millennials. There’s so much noise about that, but the money is still in a different place.

Bouchra: [00:28:23] Yeah. They’re just also intrigued. When we talk modern luxury, people who can afford the luxury, they at least have jobs.

Richie: [00:28:32] Maybe they’re not living with their parents.

Bouchra: [00:28:33] Yeah, exactly. They have jobs. Our woman is actually educated. She’s a self-purchaser. She’s not waiting for a guy to buy for her. But, ironically, a lot of men are buying AUrate because they also love the value proposition. It’s like, “Yes, it’s transparent. It’s this. It’s checking all these boxes and I love it.” It came down even to the point—a lot of companies obviously say, “Give back”, that one-for-one model, Tom’s shoes. We couldn’t give back a piece of jewelry and I don’t think it’s going to help someone in need to have a piece of jewelry, but Sophie I wanted to be very transparent in that too. Like I can’t say, “10% of my profits go to a charitable cause.” It’s too fluff for us. And, as a customer, I want to know, if you’re giving back something, what is it? Since inception actually, we’ve found a charter school out of Philly. Don’t ask me why Philly. Just we went to everyone almost in New York and no one—they have very rigid rules and they won’t necessarily work with you unless you go through a lot of approval processes. But, in Philly, they manage 15—it’s a campus that has 15 schools. Every piece we sell, we give back a school book to this school. There is a list of school books so when you buy an AUrate piece, you know which school book went to where. As easy as it is, I don’t say 10% of my profits go to “blah.” For me, it’s garbage.

Richie: [00:29:54] So you said that the marketing piece was definitely a learning curve. Did you think at all during that painful beginning [that] this is just never going to work or did you know that was light at the end of the tunnel like we’re gonna eventually figured out that this is going to be expensive and painful.

Bouchra: [00:30:07] Yeah, it was rather the latter. My whole experience—I was very comfortable losing money or making money because when you know why you’re losing money, you know how you’re going to make it back. Right? So it comes back to anything. So for us the whole 2017 experience [was] “Who is your customer and how are you going to go after them?” We knew we had proof-of-concept in the stores themselves—people, when they see it, they buy it, [when] they touch it, they know the quality, they just buy it. So for us it was just how can I just get that niche online and do it. So in the beginning it was obviously was very painful, but it was budgeted for. We were actually—it’s funny, we were much more conservative what we pitched and we were surprised completely to the upside if anything. But why we also have friends and other startups and we did a lot of research before we started spending and we hired someone who was experienced also enough to say, “Look I know it looks awful”—and you see the numbers moving. If your CAC keeps going higher, you’re clearly doing something wrong especially at this stage of the business, but you expect it to drop by X% month over month at least. And we were completely surprised to the upside if anything.

Richie: [00:31:13] Yeah. What was the most you lost in a day?

Bouchra: [00:31:14] As a the trader?

Richie: [00:31:15] I was going to ask that after, but I want—I was going to ask both, but marketing first.

Bouchra: [00:31:21] Marketing? I’m not sure I could say, but yeah, we had a pretty bad two-weeker of $70-$80 grand of burn. That was painful.

Richie: [00:31:30] Yeah. And what about trading?

Bouchra: [00:31:32] That I think is confidential information. But let’s say yeah—

Richie: [00:31:35] Many more zeros?

Bouchra: [00:31:35] —your stomach hurts a lot. Especially when you’re sitting on your desk at 8:00pm and you just get a call, “Do you want to step in my office?” Okay. It’s fine. The thing that again my ex-boss respected was, “Okay, I’m losing because of this reason. And I know how I’m going to make it back. So it’s okay.”

Richie: [00:31:59] Right. Even the worst days on the marketing side were not nearly what they were at the trading side.

Bouchra: [00:32:04] No, it’s harder. AUrate is your baby, right? It’s my baby. So for me every dollar counts—

Richie: [00:32:08] And it’s your dollar too.

Bouchra: [00:32:10] Yeah, it’s my dollar and it’s the burn. When you’re burning that much, that’s basically taking away how many months you can survive, how people look at you. In the cycle of a startup, “What’s your burn?”—that’s question number one. That counts how many months you have to live. So yeah, that was a few days off the life of AUrate. That hurts, a lot.

Richie: [00:32:33] But I assume it’s only gone down from there.

Bouchra: [00:32:36] Yeah, we’re good. It’s funny—with my team sometimes says “Ugh, ROI,” because they know we’re super ROI-focused. “Sometimes you got to spend to make. It’s fine let’s do it. Let’s try.” For me, it’s more, if you kind of know exactly what your upside is and where your downside is, and run through all the scenarios. I want to know. What is the worst case scenario? If they describe to me a worst case scenario that’s okay for me given the circumstances that they put next to it, I’m fine. But we need to try; as a startup you’re on the verge of failing every month to begin with. So it’s okay.

Richie: [00:33:09] Absolutely. At what point does the first permanent store open?

Bouchra: [00:33:13] First permanent story actually we lined it up since March 2017.

Richie: [00:33:17] Okay, so right around then.

Bouchra: [00:33:18] Yeah.

Richie: [00:33:19] Talk a bit about—you’ve done a handful of these so far on shorter leases. How do you figure out, “Okay, we want to go do this, here’s where it is, here’s what it should be like.” How does that come together?

Bouchra: [00:33:28] So we have a lot of data now online so it’s much easier. You can kind of sample your customers you know via zip code—you know exactly where they are. A big portion of our sales was New York. But actually, we were selling to every state. But a big portion was in New York and also it comes down to, “How am I going to keep control of this customer experience?” We were not willing to open right up the bat to—in California, even though it’s kind of our state number two after New York. For the very simple reason that it takes time to fly from New York and then if something blows up you kind of want to be there. So the executive decision, given that segmentation—so we started spending in July 2017 and by November we opened three stores in a batch. So we started the East Coast. We stayed nimble. Our stores are profitable so quite frankly we can open as many “we want”—we can go crazy. But, first I didn’t have enough people in my team. Second, I want to be 100% in control of that customer experience that goes to the stores. Why? Because we don’t view our sales people as just sales associates. We view them as a brand ambassador. And for them to be that, they need a lot of training. They need to also associate and have a direct line with headquarters and to be involved.

Bouchra: [00:34:50] So we hire fans of the brand, but we don’t just hire pushy sales people. What we found extremely valuable is in the stores, I had someone actually called me yesterday about the Madison location—[that] it’s like Apple. I’m like, “Yeah, yeah, we’re trying to transpose that exact online experience that you get into the offline experience.” And that line of communication as much as in the website, you can click on “About Us” or press or whatever that is to read more about the brand. I want you to have access to that into my store as well. So that’s a lot of investment and it’s been working.

Richie: [00:35:24] How big do you think this can get and then how big do you want it to get?

Bouchra: [00:35:27] When people mention some big names—”I got my ring X”—I want AUrate to be mentioned. Yeah—this is the fine jewelry, contemporary brand that people go for when they’re looking for modern luxury that’s accessible. And it’s actually very flattering that I have—our first sales obviously were friends and family and friends of friends. But when you see someone buying you from Japan or Australia—that’s when you’re like, “Okay, so this person has no idea who we are, we’re not friends. They’re not in the U.S. at all.” But there’s something about this brand that made us so. AUrate for instance is international—something that not many direct consumer brands at least in the U.S. have in terms of, but I think it comes from our backgrounds and the product itself. It’s a very easy business to scale internationally.

Richie: [00:36:16] So it’s an interesting non-numeric answer for a number person. Do you have a number in your head or you don’t think about it like that?

Bouchra: [00:36:19] I have exit strategies in my head.

Richie: [00:36:21] But not a literal number.

Bouchra: [00:36:22] I don’t like thinking that way because you might be surprised to the upside or to there’s a downside. For me, it’s more the experience. I was telling someone I want to be a serial entrepreneur. When I don’t feel challenged anymore—it’s a characteristic of my personality. When stuff is too easy, I’m bored and I want to do something else. So if anything, I actually miss those days when AUrate had no money and we were hustlin’ our way through painting walls. That was fine because we do like those postmortem—”Do you realize where we came from in less than 12 months?” I think that’s the fun part.

Richie: [00:36:59] What do you think the most misunderstood thing is about the brand?

Bouchra: [00:37:02] Actually it’s something interesting—we got a lot of feedback that our website looks very high-end. So when they just open without clicking on any piece, they think it’s expensive. Our website conveys this luxury feel so that you can actually lose people just when they see how your creative assets are. They think, “Oh my gosh, this is expensive” and you lose them before they click on “Shop” and check the prices. That’s something that we’re working on. How can I convey—without looking cheap—how can I convey that price point that I’m trying to position myself into?

Richie: [00:37:36] And then I just commented to 2018, in terms of where do you focus now: How have you thought about this year—we’re kind of halfway through—and so forth?

Bouchra: [00:37:43] For us it’s—we’re focused on more eyeballs. I think that’s the biggest focus. And scaling. The team now is close to 35 to 40 people. Yeah. Before we raised funding, it was four and a half of us—me as a half—and it gives you an idea of how we are. So we’re focused a lot on HR and we’re focused a lot on scaling.

Richie: [00:38:03] And that includes the store teams too.

Bouchra: [00:38:04] Yes. I haven’t scaled a company before. So for me it’s just learning—I sit. And again, as I said, I love listening. I think I’m very tough on my baby in a way because, again, I look at numbers—is this ROI something good? So we spend a lot of time talking to investors who have other portfolio companies—What are other people doing? How does our CAC look? And it’s funny—they look at it [and ask], “Why are you so harsh?” And we have that with the team—we sit down. Because there’s no ego. This business, if you have an ego, just forget about it, call it a day and go home. You just have to be, again, comfortable losing money, but also comfortable being told, “You’re doing it wrong.” And I think something we’ve been very good at is switch very quickly. When we know something is just not working, it’s okay, cut your losses and move on. Let’s not keep reverberating about what was bad. Just know why it was bad and do something else. And it’s okay.

Richie: [00:39:00] Yeah. And then, I guess as you look to the future: What’s on the horizon, what are you most excited about?

Bouchra: [00:39:05] So we have a lot of things that we haven’t done yet. For instance, anything that’s influencer marketing. More stories that are not just East-West. I kind of want to go a little bit in the middle and some very one-off, incremental initiatives overseas. That’s something that we’re very excited about. I’m excited about—potentially next year I have a team of 60 people, 70 people, I know. I’m excited about how to learn how to manage that many people. I think for us—Sophie and I—that’s going to be the challenge again. How can we make ourselves available the way we are right now? Now we invest even the part-time salesperson whose sitting in the Boston store. Her final interview needs to be with one of us because we need to be involved in that. I’m excited about learning how I can still manage doing that at a much bigger scale.

Bouchra: [00:39:51] There is another project that we introduced. It’s the first-ever style inbox in the fine jewelry business. The way this works is you go online, you answer very few questions. Depends on the workflow—about five to seven questions—and you tell us your preferences. “I like white gold,” “understated pieces,” “day-to-night,” “I hate earrings,” “please put as many rings as you can.” And, so we have an algo in the background. What we look for is obviously optimizing the technology—internally we’re very focused on the tech side of things in our company. But I’ll go put together—this person would be interested in this side of the collection. We add the human component into that—that’s a stylist who takes that whole data—there’s a section where you can leave as many comments as you want. And they take the comments, match with what the algo gave, and they put together a box of five pieces to you. So this is actually a very crazy project because no one has done this before. We send you actual pieces from the collection. Gold and diamonds, for free.

Richie: [00:40:56] Not cardboard.

Bouchra: [00:40:57] We keep your credit card info, but you’re not charged. To be clear, it’s non-subscription. And this came very simply from what our customers wanted. So we do a lot of focus groups. We take feedback from people who buy online including fine jewelry buys or people who just buy online and never buy jewelry. And we put all these groups of 10 to 15 people and we sat them down [and asked], “What can we do better?” We send surveys as well. So done nothing but just asking our customers what they want. And they said, “I want to be styled. I love your collection. You say it’s very easy to layer. I don’t know how to layer. Thanks, style me.” So we have this new feature. Very excited about this. We sent almost half a million [dollars] worth of gold to people within 48 hours and that’s all [while] we’re waiting for more boxes to come. We have a big waitlist and we’re going to see what conversions we’ll get from that.

Richie: [00:41:47] Speaking of risk, do you expect to get that back?

Bouchra: [00:41:53] Again, I believe in the good side of people. No, we have a credit card. It’s only in the U.S. to be clear. And they have seven business days to try and return. So yeah, I’m hoping we get the boxes back.

Richie: [00:42:01] I guess we’ll know in a week.

Bouchra: [00:42:03] They sold out in two days. So it’s one week so we’re waiting. Ten more days.

Richie: [00:42:08] We’ll have to do a follow up at some point to know if you’re insolvent or not, in a week.

Bouchra: [00:42:11] Yeah. Our policy is 30 days free shipping for returns, no questions asked. People can wear that piece for a month if they wanted to and return it. We’re superb below market standards and returns. But yeah we sent five pieces of gold.

Richie: [00:42:27] We’ll see how that ends.

Bouchra: [00:42:28] Yes.

Richie: [00:42:29] I’m sure it will end well.

Bouchra: [00:42:30] Yeah.

Richie: [00:42:31] Awesome. Thanks so much for talking.

Bouchra: [00:42:32] Of course. Thank you for having me.

Richie: [00:42:40] Thanks for listening to the Loose Threads Podcast. You can read full transcript of the podcast and join the newsletter at LooseThreads.com. Feel free to also leave a review on iTunes—we always appreciate it. And thanks to George Drake, Jr. for editing this episode. We have a great roster of upcoming guests including Rachel Winter of Soapwalla, Kara Cohen of DripKit and Eliza Blank of The Sill. Thanks for listening, talk to you soon.